Berkeley Council hears minimum wage increase pleas

Berkeley is looking at setting a $10.74 minimum wage (the same as San Francisco’s) for businesses with fewer than 50 employees which would affect many local businesses, including restaurants. Photo: Postcard PR

Berkeley’s adoption of an increased minimum wage moved a step closer this week. The City Council heard a long line of advocates urging adoption a $10.74 minimum wage for employees in Berkeley.

The City Council will have a special meeting on May 1 on a minimum wage ordinance.

The Commission on Labor’s recommendation to the Council is to set a $10.74 minimum wage (the same as San Francisco’s) for businesses with fewer than 50 employees and non-profits, to include a medical benefit requirement, and to adjust the minimum wage annually in line with CPI. For “corporate franchises” or businesses with over 50 employees, the commission recommends a minimum wage increase to “the equivalent of the Berkeley Living Wage,” which is currently $13.34 per hour.

“I urge you to assign more weight to the needs of low-wage workers and the wishes of your constituents than to anecdotal threats of economic doom by a few self-interested business owners,” said David Fielder, who has lived in Berkeley for more than 30 years.

“It’s a very straightforward issue of social justice,” said Nicky González Yuen. “One of the things I love about living in Berkeley is that we have as a community taken the lead on these issues time and time and time again.”

San Francisco adopted an increased minimum wage in 2004, while San José passed its higher minimum wage in 2012. Oakland and Richmond are considering new minimum wage laws, and the California legislature recently passed AB10, which will raise the state minimum wage to $10 by 2016. President Barack Obama signed an executive order in February that will raise the minimum wage for federal contract employees to $10.10 an hour, starting next Jan. 1.

While a number of public speakers anticipated pushback to the increase from local business owners, the two business owners that spoke on Tuesday night were both broadly supportive of an increase.

“There is no quality business without really well-paid employees,” said Dorothée Mitrani-Bell, owner of La Note and Café Clem downtown, and a member of the labor commission who abstained on the wage recommendations. “The implementation of this ordinance is what is really at stake for us small business owners. The schedule is a little steeper for some of us to work with right away.”

The commission’s plan is to institute the new required wage levels on June 30 this year, with increases to occur each subsequent June 30 based on the CPI for urban wage earners in the Bay Area. On June 30, 2015, an additional health care requirement is added, and starting in 2016 the small business minimum is increased by $0.55 each year after the CPI adjustment until it reaches parity with the Berkeley Living Wage, which is expected in 2022. After that, the proposal is that there is no distinction between large, small and non-profit businesses.

“We are in support of raising the minimum wage and working together to craft an ordinance that helps to raise up those individuals on the bottom of the wage scale,” said David Rowe, manager of the downtown restaurant Jupiter. “But the amount of this increase is just staggering. Simply put, it’s too much, too fast. We believe more investigation and fact finding is needed to illuminate the real world impact this will have… We implore you to take a very gradual, phased in approach to ensure that Berkeley’s small business community continues to thrive for years to come.”

Other Council business

In a meeting with a very light agenda, the City Council made a few other decisions on Tuesday night. A special session was devoted to the results of a community survey on potential ballot measures, and in the regular meeting the council agreed to commission a second survey with further questions.

As Berkeleyside previously reported, only a proposed sugar-sweetened beverages tax garnered significant majority support from surveyed likely voters. A second survey this month will hone the language on that proposal, focusing on the support for a 1 cent per ounce tax that could be a general tax (requiring simple majority support) or a special tax (needing 2/3rds majority).

There was strong council support as well to test further support for a reduced parks bond measure. In the community survey, 54% supported a 10% increase in the parks parcel tax, but to pass the measure would require 2/3rds support. A proposal to issue a $25 million bond and a $2 million special tax to fund operations mustered only 52% in the survey. Councilman Gordon Wozniak suggested a new survey could test a $15 million bond and a $1 million special tax.

“I think we have to think about a really stripped down version that just does the basics,” Wozniak said. “There’s going to be substantial opposition to any tax in Berkeley.”

Mayor Tom Bates called the deterioration of Berkeley’s parks “the major issue we have in our city at this time.”

The third item on the new survey will test further a commercial vacancy tax, which had only 54% support in the first survey.

“The large number of ground floor vacancies creates blight in our communities,” said Councilman Jesse Arreguín. “That’s an important issue. It has a direct impact in terms of economic development and our vitality.”

“The opportunities to steal in the city of Berkeley are too numerous,” Hogan said.

She urged the adoption of better procedures — such as no shared passwords, and splitting the handling of cash and recording of it — and cautioned that cutting supervisory positions can create more opportunity for theft and fraud. City Manager Christine Daniel supported all of Hogan’s recommendations.

I am glad to see the minimum wage ordinance is making progress. Based on what I can see in this article, businesses do not oppose the minimum wage increase but just want it to happen more gradually. I think that means the minimum wage ordinance will pass, probably with some modifications to accommodate business.

Nationally, the minimum wage peaked in the 1960s and is now only about three-quarters of what it was then (after correcting for inflation). If all income groups had gotten a fair share of the country’s economic growth since then, minimum wage would be much higher than it was in the 1960s.

EBGuy

Here’s some more lowlights surrounding cash handling.Several red flags in PRW operations suggest that more theft may have
occurred or may be continuing to occur:- Boat launch revenue sharply declined for three consecutive years
after PRW tripled the launch fee. See graph below.
– No boat launch revenue in August 2007 a peak boating month.
-Thousands of dollars in refunds at the Tuolumne Camp store, which
was essentially a concession stand.
Yikes!

Heather_W_62

Richmond is working toward an increase to $12+ per hour. S.F.’s minimum wage is above $10. Other municipalities long ago hashed this out. Berkeley is behind the times.

John Freeman

If all income groups had gotten a fair share of the country’s economic growth since then, minimum wage would be much higher than it was in the 1960s.

That’s almost certainly false. Here is why:

You are right that the level of economic output per worker has by some measures increased quite a bit since the 1960s. Meanwhile, the value of wages as measured in the commodities people consume to live has generally remained flat or fallen.

It’s a fallacy to conclude from that that workers aren’t getting a “fair share” of their increased output.

The problem is that you must ask: where did that increased economic output go, if not to workers?

From the 1960s until (depending on how you look at it) around 1990 or around 2000: wages and corporate profits were in a back and forth horse race. It is not until 2000 that corporate profits clearly skyrocket relative to wages.

In other words, for the first few decades of flat or declining wages, corporate profits were roughly in the same boat. There was some volatile back and forth but no clear winner. All that increased output visible in GDP was essentially on paper and in the form of an increasingly worse trade balance. There wasn’t a post 60s big windfall of useful output being held back from workers. There was no increase in “fair share” to be had. On average, that “extra output” was being spent just to keep the economy afloat.

Since 2000 corporate profits have skyrocketed relative to wages but you shouldn’t mistake this, either, for an increase in real output that workers are missing out on. Much of these profits have wound up as reserves — paper wealth only.

I don’t mean to suggest that workers are in good shape. None of this is good for them. But you can begin to see that simply raising wages won’t work. Real output of useful things is being held to a slow growth rate for reasons outside the question of worker wages and consumer demand.

One way that workers do get hurt badly in all of this is that those purely paper profits get spent on speculation, such as in real estate. Workers experience that as higher rent demands. That really does eat away at real consumption by the working class. Higher wages, such as by raising the minimum wage, won’t really change that dynamic, though. The largely paper high profit margins since 2000 will be barely touched by this kind of wage tweaking. CPI indexing won’t much help since it will be calculated allowing for “substitutions” in the components of the index — in other words lower wage workers whose wages track the index will continue to be materially poorer and poorer, albeit at an incrementally slower pace. (You can see evidence of this happening in measures such as the percentage of incomes spent on housing in Bay Area cities.)

I said “almost certainly false” and here is the caveat behind that “almost”:

If it could be shown that Berkeley’s very-low-wage employers were themselves taking larger and larger profits on the bakcs of workers, and if the quantity of those Berkeley-specific profits is such that redirecting some of them to wages would make a big difference in people’s lives, then sure there could be a real justice question here.

But nobody in Berkeley seems to bother to try to collect that kind of economic data, let alone our Office of Economic Development, so who knows.

My strong suspicion is that the minimum wage effort is driven mainly by political grandstanding and popular confusion about the likely impact of the change.

guest

How much more business unfriendly can Berkeley get?

The city council would like to find out!

guest

I wouldn’t use anything Richmond does as a positive example. That city is a nightmare on all levels.

Guest

You’d think the city would be able to figure out who was in charge of cash handling in those places during those times and prosecute them, but asking for city employees to bear the consequences of bad or illegal behavior is just too, too cruel.

TN

I read in the SF Chronicle recently that the lowest paid employee at In-and-Out burger is paid $10.85 per hour. If a much derided “McJob” pays that much over the state minimum wage, it suggests that the state minimum is much too low. Berkeley’s proposal is not that aggressive.

guest

The minimum wage increase will help local businesses. The people earning minimum wage in Berkeley also spend money here. Now they will have more to spend. Food, clothes, movie tickets, dining out, books — the poor and middle income folks spend all their money — give them more, they spend more. That is why the increase in the minimum wage will help businesses.

Charles_Siegel

“The problem is that you must ask: where did that increased economic output go, if not to workers?”

The question of wages and profits is a side issue. A larger share of after-tax income went to those with the highest incomes after Reagan’s tax cuts for the very rich and later Republican tax cuts – regardless of whether their income came from wages or from profits.

guest

Richmond is admirable for standing up to the mortgage industry.

John Freeman

If you want to know where the increased output went, look at the Congressional Budget Office graph at [….] and you will see that most of it went to those with the highest incomes.

You are misinterpreting the graphs that you are using. My suggestion is that you try to think more clearly about the difference between on-paper income and real production of useful things.

The inflation adjusted incomes of the 1% tell you pretty much nothing about the material consumption of the 1%.

1%-er income has drastically increased without there being a correspondingly large increase in useful output. The 1% do not live hand to mouth. Their increased income does not correspond much to increased consumption.

Yes, the 1%-er have a large amount of on-paper surplus income (even after adjusting for inflation) — but most of this is going (directly and indirectly) into financial speculation, not actual production.

If the 1%-ers tried to spend all their money at the grocery stores the result wouldn’t be a correspondingly large amount of new food produced. It’s just that food inflation would get worse.

There is a populist sentiment among some of the working class that, hey, if their wages were significantly higher they could buy more of what they need. For the working class as a whole, that give-us-higher-wages sentiment holds true only if such wage increases would be matched by corresponding outputs in production of useful goods. In other words, significant monetary redistribution only betters the working class if it is not eaten up by inflationary effects.

Let’s look at something concrete: Why are we experiencing food inflation? Why doesn’t capitalist competition just produce more food and reduce that trend?

In historic cycles it might have once been that food shortages were the result of wages being too low. In cycles like that, there aren’t enough wages chasing food. The price of food tended to deflate. As price deflation sets in, food producers have more and more trouble making a profit and so they produce less. Food has become cheaper in this kind of cycle but, still, that’s only because an increasingly large mass of workers can’t afford it — so producers can’t afford to grow it.

Today we’re seeing food inflation caused by increasingly drastic resource constraints: the price of oil; water shortages; extreme weather. Consumer demand isn’t the problem. No matter how much workers organize for higher wages, for example, it’s not suddenly going to be easier to irrigate fallow Central Valley fields. No matter how much workers organize for higher wages, the threat of fuel shortages for winter heating needs looms large.

That means that the asset owners are pulling in profit, same as always, but they don’t have so many places to invest it that result in higher outputs of useful things. The 1% has concentrated a lot of the national on-paper income in their own hands but they can’t magically snap their fingers and reverse the resource constraints. (If they could they’d do it. For individual 1%ers, even if not for 1%ers as a class, there’s a lot of money to be made solving these deep problems.)

So instead that concentrated income mostly operates as on-paper-only inflating one asset bubble over another.

Completely_Serious

I wish Berkeleyside would do an investigation on the City Auditor’s office. What the heck does Anne Marie Hogan do, other than run unopposed? Looking at the study referred to in the article, I’m going to guess it cost more than $52,000 to prepare. Does that make sense?

http://berkeleyside.com Frances Dinkelspiel

According to the city auditor’s website she is scheduled to do six audits this year

For a town that fancies itself to like peace, we sure do like to bring out the gun and tell people what to do, and how to run their businesses. “you must pay more, trust us, its good for your business, and if you dont we assert the right to ruin you, and employ violence if necessary.” as if business people are so stupid they need some politician that has never employed anyone to tell them what to do. If its so important to the Berkeley populace that people get paid more, let the business owners voluntarily do it and then advertise that to attract customers. Surely all the fools that don’t see the value in this race to the top will experience a loss in revenue, as customers seek more expensive options for dining and shopping. Maybe we will learn that Paying more is a huge competitive advantage, and that the artificial minimum we are proposing is actually too low. I doubt that will happen, but isnt that a more moral option than employing violence and coercion to force the increase? If we must go down this path though, hopefully the city council will have the good sense to ban any labor saving devices, like self checkout machines, ATMs, and auto food dispensers, and also forbid businesses from trimming their existing staff, or trying to increase the number of tables each server must cover… If they don’t, I see, like the CBO does in analyzing minimum wage at the federal level, some layoffs coming.

It’s also fascinating to me that in the same breath that they are trying to increase the labor cost burden on small businesses, they are also hollering about empty storefronts. It’s too bad they can’t hold the gun to the heads of would be entrepreneurs and force them to start businesses here.

John Freeman

Haha! Just in time The Atlantic has published an article comparing consumption differences among the top and bottom of the wage scale. It supports what I’ve been trying to explain to you:

That article says very clearly that the rich do spend more than the poor, contrary to your claim that they put it all into financial speculation:
“For example, the poorest quintile of Americans spends about $22,000 each
year. The richest spends about $100,000 each year. (The richest 1
percent spends hundreds of thousands of dollars each year.)”

The richest do buy lots more things, whether you consider those things useful or not, so much of their income is going into actual production rather than financial speculation.

With a more equal distribution of income, the rich would spend less on luxuries and the poor would have more to spend on rent (where their spending has gone up most according to this article). Housing is not a zero-sum game: if people have more to spend on housing, the market will produce more housing.

guest

That article doesn’t support what you’re saying at all. Changes in spending trends have little to do with the decline in the relative spending power of lower and middle-class wages in America.

Surprised to see YOU of all people making an argument that supports the 1%.

guest

>If a much derided “McJob” pays that much over the state minimum wage, it suggests that the state minimum is much too low.

In-N-Out and McDonald’s are not the same companies, and do not treat their employees even remotely close to the same.

guest

Is this sarcasm, or do people genuinely think that stupidity is admirable in this world-turned-upside-down?

guest

The minimum wage increase will help local businesses. The people earning minimum wage in Berkeley also spend money here.

The people earning minimum wage in Berkeley do not live here, and spend as little of their money here as possible.

An increase in the minimum wage in Berkeley will help businesses in El Cerrito, Emeryville, Richmond, and Oakland.

guest

My teenage kid, lives here, and she makes minimum wage. Something tells me, she is not the only one.

guest

On the Parks Bond – we love our parks, that’s not the issue City Council. We already pay higher property taxes than any other city in California and no, I am not inclined to pay more – for anything.Take the money that you have and reduce it in some places and increase it for parks. Better parks doesn’t have to be an either/or. HINT: start with the social programming budget, OR get our trash picked up by Waste Management, OR transfer our local public health care over to the county OR…pick another and insert it here. We have PLENTY of money to run this city at a higher level but we SHOULD make some more difficult policy choices – not just ones that involve my wallet. I’ll bet that if you made this a “resident” tax and not just one attached to property owners there would be a radical shift in how many people jump up and down for more taxes. And not the kind of “radical” that some on the Council might hope for.

John Freeman

That article says very clearly that the rich do spend more than the poor, contrary to your claim that they put it all into financial speculation

My claim was that large amounts of high incomes go into financial speculation. Not “all”. Geeze. Even the rich have to eat.

You have ignored how the “$100,000″ the rich “consumes” in those charts breaks down. That’s where that article gets very interesting.

It points out that between 1984 and 2012 the percentage of upper incomes going to education, health care, and an owned home went up quite a bit: these are all categories that correspond to relatively little real output of useful goods for consumption. That spending, especially education and real estate, is largely income going into financial markets.

Meanwhile, the real consumption by upper incomes of meats, utilities, vehicles, and reading (which in 1984 was accomplished mainly by print) has all sunk considerably.

Again, you are making the mistake of confusing nominal incomes and prices with real production and consumption of useful things.

With a more equal distribution of income, the rich would spend less on luxuries and the poor would have more to spend on rent

People have been spending more and more on rent. As a percentage of income, the amount the working class is paying in rent has gone up and up over the past 30 years, according to the article you are looking at.

You have not managed to explain why this enormous increase in rent spending by such a large part of the population hasn’t been matched by a corresponding increase in production to offset inflation.

It’s an empirical fact that more and more has been spent. I can tell you that maintenance costs and property taxes don’t capture that increase in rent. Much of that increase in rent is additional profit — available for investment.

So now tell me why capitalist competition didn’t keep rents as a percentage of incomes smaller?

John Freeman

My argument doesn’t “support the 1%”. It undermines some unrealistic claims made for minimum wage hikes.

Changes in spending trends have little to do with the decline in the
relative spending power of lower and middle-class wages in America.

They do when they show shifts from paying the real costs of production of useful commodities to paying financial rents, especially when one also starts to consider the systemic reasons why we have things like food inflation.

guest

I run a business in Berkeley, and I’ve always been able to pay well above minimum wage.

Guest

Isn’t it great your teenage daughter has an opportunity to get a job. What is most important in the exchange with her employer, the wage or the experience? If we increase the minimum wage, is there any chance that the opportunity for the experience, for her and others like her, might not be there in the future?

Charles_Siegel

“It points out that between 1984 and 2012 the percentage of upper incomes
going to education, health care, and an owned home went up quite a bit:
these are all categories that correspond to relatively little real
output of useful goods for consumption.”

The rich have been spending a lot more on education and health care, and the poor have been less and less able to afford education and health care. What is the obvious solution?

When you claim that spending on education and health care is not spending on consumption, that pretty much ends any hope of discussion.

Dan McDunn

My assumption is you are not paying above market for your industry. No one has to hold a gun to your head to make you do what you are doing. You are paying the correct amount to obtain the skills you need to run your busiess based on the competitive market for talent. Let people pay whatever they want. This will sort itself out.

guest

We should do the same about worker safety. Rather than having the government point a gun at businesses and tell them they must have safe conditions, we should make it voluntary. Businesses can advertise that they are safe, and get customers that way.

If there are customers who are willing to have unsafe conditions for workers in order to save money on the products they buy, those workers can just die in industrial accidents. It sometimes happens to garment workers in Bangladesh, and it should happen everywhere.

John Freeman

When you claim that spending on education and health care is not spending on consumption

You’ve misunderstood something. I am claiming that much of the premium prices on those services, well above the cost of materials and labor, is not directed to real production of useful commodities but wends its way through financial markets and into various financial instruments. It is “on paper” money, only.

Dan McDunn

Um, you know, like, someone is going to totally have to pay for the wage increases, right? I wonder who is going to do that? Maybe, like the consumer, when the business owner has to pass on the increase in expenses… Uh, duhhh.

Oh right, no one ever thinks about unforeseen consequences here, we are all too busy trying to make the world a better place at the end of the barrel of a gun. If we are going to force wage increases, wouldn’t $20, wait, $50 an hour be even better for the economy?

bgal4

Likewise, I was peeved to learn the smallest can 13 gal is being fazed out. This change suggests the city is more interested in raising funds than encouraging zero waste.

bgal4

With how large of a staff?

bgal4

Richmond police dept has made serious gains in reducing violent crime, they are doing an admirable job.

guest

And you base this on… Their declining crime? There wonderful shoreline (best in the East Bay)? Oh wait; its those people you can’t stand but don’t know.

guest

No, they don’t and saying so doesn’t make it true.
The evidence you point to does not support the conclusions you draw.

guest

Most libertarians I know own their own homes. Most occupy-friendly lefties I know are lifelong beneficiaries of rent control.

guest

Increasing the minimum wage has been shown to kill job growth and lead to inflation, but who wants to think about things like that?

John Freeman

Most libertarians I know own their own homes. Most occupy-friendly lefties I know are lifelong beneficiaries of rent control.

What about protestant Scottish gay libertarian Occupy-friendly people of color?

Guest

Interesting. Given the favorable inheritance tax laws (and making what may be a faulty assumption about life expectancy*) this could very well be true, practically speaking.

That said, most non-libertarians I know would not consider someone who lives in their parents’ basement to “own their own home”.

If you downsize do it before July or you’re locked in for another year. We’re dropping to a 20 gallon and that should save on the increase.

guest

Right. The cost of going to UC has gone up so much because the financial markets are wildly speculating in UC stock. UC charges so much more than the cost of materials and labor for that they are rolling in money and don’t have any budget problems at all.

Now, back to the real world.

guest

We have raised US labor standards so high that the jobs have gone to Bangladesh, and you are saying that we should get the jobs back by lowering US wages and safety regulations down to the Bangladeshi level.

If those people in Bangladesh don’t like working in buildings that might collapse and kill them, they should just go do something else. They have plenty of options.

I wish you had been born in Bangladesh. You would feel differently about this.

bgal4

thanks. I down-sized to the 13 gal during another fee increase some years ago, we only half fill that can.

guest

Do you really think that saying that someone you disagree with politically is a fat kid who lives in their parents’ basement (Moderators, follow the link they posted) adds to the discussion in any way?

guest

Food inspection in the USA is a joke. Safety theater that makes people FEEL secure but doesn’t actually keep them safe.

Conclusively prove something that hasn’t happened yet? Not even weathermen can do that.

John Freeman

The cost of going to UC has gone up so much because the financial markets are wildly speculating in UC stock.

Of course, most upper-income education spending is not directed at UC but that aside: What’s up with UC?

UC has been cutting services and academic infrastructure for a long time. The actual per-student instructional spending at the core of the system have been going down, even as fees go through the roof. This is not controversial: UC itself says this. They put the unadjusted figures at $21,000 per student in 1990, and $16,000 in 2009.

Meanwhile, the Regent’s oversight of the system’s endowment funds has yielded comparatively terrible returns over the past decade. Similarly sized endowments at major universities have done much better.

During this period investigations revealed that Regents had taken an unusually “hands on” approach to managing the endowment, apparently directing UC funds in ways favorable to their other financial interests.

System spending outside of the instructional mission has gone up, helping to socialize the costs of research that yields private profits. Much of that increased spending is, yes, in heavily financialized markets like real estate development.

At the level of the state budget UC’s “go to” excuse is always that state research grants and capital investment funding can’t be used for instructional spending. That’s certainly true but it glosses over the fact that in the state budgetary process the two kinds of funding compete for a share of a finite state budget.

In short, yes: excessive financialization has a lot to do with why UC fees are so high (even though there is no such thing as “UC stock” per se).